Investment gives retailer strong online presence in India
The $16 billion investment, the largest Walmart has ever made in an outside business, gives the retailer a leading position in the growing market of 1.3 billion people and a chance to blunt Amazon’s drive to expand its share of the global e-commerce market.
“India is one of the most attractive retail markets in the world, given its size and growth rate, and our investment is an opportunity to partner with the company that is leading transformation of e-commerce in the market,” Walmart chief executive officer Doug McMillon said in a statement.
The remainder of the business will be held by some of Flipkart’s existing shareholders, including Flipkart cofounder Binny Bansal, Tencent Holdings Ltd., Tiger Global Management and Microsoft Corp. Google parent Alphabet Inc. had discussed joining Walmart in its investment in Flipkart, and those discussions will continue, Walmart said. If successful, Walmart’s investment stake could be reduced.
Flipkart’s board reportedly decided to approve Walmart’s bid in the belief that the deal would be more likely to gain regulatory approval. Amazon.com, the No. 2 e-commerce operator in India and Flipkart’s chief rival, had also been vying for a stake in Flipkart. Amazon was gaining ground on Flipkart, and now that progress will be jeopardized by Walmart’s infusion of cash and retailing expertise.
“With the investment, Flipkart will leverage Walmart’s omnichannel retail expertise, grocery and general merchandise supply chain knowledge and financial strength, while Flipkart’s talent, technology, customer insights, and agile and innovative culture will benefit Walmart in India and across the globe,” Walmart said in a statement announcing the investment.
Forrester Research Inc. projects online sales in India will reach $27 billion this year and grow at an annualized rate of 26% over the next five years. That compares to $395 billion in online sales in the United States in 2017, a figure that represented a 15% increase from the prior year, according to U.S. Census Bureau figures.